Market Tea Leaves - GOP Harpoons Prez & PO
This newsletter provides free market direction trading insights that are derived from our seasoned and unique, inter-market analysis. We hope that this information will provide both the novice and seasoned trader with valuable assistance. Our approach is to harvest clues from the Market's “tea leaves” as to what the market is doing or is likely to do.
Indices – The March S&P 500 emini ES contract is up at 1509.25 and is up 9 ticks.
All of Asia closing lower. As of this writing all of Europe is trading higher.
Possible challenges to traders today is the following:
Yesterday there was no major economic news to speak of, so the markets were left to their own devices. We said our bias was towards the short side because the USD and Bonds were stronger. Today we have a different situation. The USD is weaker, as are the Bonds and Gold is only 12 ticks away from its previous close. The great thing about market correlation is that it gives you a clue as to what to look forward to.
On the political front it appears as though Speaker Boehner has decided to attack the President in terms of sequester spending scheduled to start in the March time frame. This came as a result of a speech the President made on Tuesday requesting that Congress go easy on spending cuts. The President also suggested elimination of some tax deductions as a way and means of spending reduction. Apparently this was enough for the Speaker who went on the offensive to say that he's not opposed to sequester spending cuts if no other alternative can be found. So this is the new and imporoved GOP in action. They won't outwardly hold the country hostage as they did in 2011; they'll set up events such that it works out that way. So come March 1st they'll just innocently sit back and say "oh well we have to cut, it's the law you know." I've been wondering why they're so eager to extend the debt ceiling. They're waiting for a tsunami of events to occur such that there will be no other alternative. If you're wondering what this has to do with markets; I would say to you everything. Look at what happened during the recent fiscal cliff crisis. If you're wondering why we haven't had correlated markets since the election, look no further. The markets do not like uncertainty when it comes to fiscal issues and anything that reeks of uncertainty is not viewed in a positive light. The Smart Money is loving it because thus far they made any issues about March 1st or sequester spending cuts. Will the markets survive? of course. But it also seems to me that the GOP knows all too well that Congress will only act when it has to. In other words, they know that DC drags it's feet when it comes to spending cuts and they've setup events such that it has to happen. Case-in-point: they're now going after the Postal Service to cut Saturday delivery of First Class Mail. Come August we will no longer receive mail delivery on Saturday. Now you may view that as a good thing but think about it, you can't include a Saturday when it comes to paying a bill. The reason why the Post Office has lost money in recent years? Most folks would say it's the Internet and eCommerce. No. The Postal Service is the only government agency that has to fund 75 years worth of retirement benefits in a 10 year window. This law was passed in 2006 with a GOP majority in Congress and a GOP President. Without this requirement the Postal Service would have posted a profit, yes a profit of 1.5 Billion Dollars. Because of this Saturday business it is estimated that 20-25,000 postal workers will lose their jobs. Postal workers are not entitled to receive Social Security, I know. My father was a postal worker for 46 years. I know this first hand.
As readers are probably aware I don't trade equities. While we're on this discussion, let's define what is meant by a good earnings report. A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance. Any falloff between earning per share or forward guidance will not bode well for the company's shares. This is one of the reasons I don't trade equities but prefer futures. There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.
Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution.. Today market correlation is calling for a lower open and our bias is towards the short side. Could this change? Of course. In a volatile market anything can happen. We'll have to monitor and see. For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading. A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this. Here it is:
Please note the video is about a half hour in length and we plan on producing more in the near future. Also note that in the near future we will have other videos where we will interview various trading leaders.
- Sequester spending cuts to commence around early March
- Debt Ceiling in the May time frame.
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